Briefly: in our opinion, full speculative short positions (250% of the regular position size) in gold, silver, and mining stocks are justified from the risk/reward point of view at the moment of publishing this Alert.

Today's Alert is going to be brief, as gold is trading at the same level it did 24 hours ago and silver is about 25 cents lower than it was trading at the same time yesterday. This means that the points that we made earlier this week, remain not only up-to-date, but that they were confirmed by PMs' price action.

It might be too early for the final verdict, but it appears that we entered the current short positions right before the top and we increased their size right after the top, still very close to it.

The top might not yet be clearly visible in case of gold, but it is clear in case of silver and mining stocks. It took just one day for silver to drop from $19 to high $17's. It ended the day above $18, but it's clear that the strong momentum that silver generated during the rally, is already gone.

The HUI Index declined quickly back below both 250 and the January highs. Even though gold rallied somewhat before the end of the session, gold miners didn't. That's a bearish confirmation of what we wrote yesterday and on Monday.

Summary

Summing up, it seems that the precious metals sector has just topped. Yesterday's decline and relative weakness of mining stocks serve as confirmation. In our opinion, big short positions in gold, silver, and mining stock continue to be justified from the risk to reward point of view.

As always, we'll keep you - our subscribers - informed.

To summarize:

Trading capital (supplementary part of the portfolio; our opinion): Full speculative short positions (250% of the full position) in gold, silver, and mining stocks are justified from the risk/reward perspective with the following stop-loss orders and binding exit profit-take price levels:

• Gold futures: profit-take exit price: $1,422; stop-loss: $1,712; initial target price for the DGLD ETN: $33.30; stop-loss for the DGLD ETN: $19.88
• Silver futures: profit-take exit price: $16.11; stop-loss: none (if gold moved to $1,712 we would view silver positions as no longer valid); initial target price for the DSLV ETN: $20.68; stop-loss for the DSLV ETN: none (if gold moved to $1,712 we would view silver positions as no longer valid)
• Mining stocks (price levels for the GDX ETF): profit-take exit price: $20.22; stop-loss: $33.11; initial target price for the DUST ETF: $11.29; stop-loss for the DUST ETF $3.48

In case one wants to bet on junior mining stocks' prices, here are the stop-loss details and target prices:

• GDXJ ETF: profit-take exit price: $28.32; stop-loss: $50.22
• JDST ETF: profit-take exit price: $20.97; stop-loss: $5.18

Long-term capital (core part of the portfolio; our opinion): No positions (in other words: cash)

Insurance capital (core part of the portfolio; our opinion): Full position

Whether you already subscribed or not, we encourage you to find out how to make the most of our alerts and read our replies to the most common alert-and-gold-trading-related-questions.

Please note that the in the trading section we describe the situation for the day that the alert is posted. In other words, it we are writing about a speculative position, it means that it is up-to-date on the day it was posted. We are also featuring the initial target prices, so that you can decide whether keeping a position on a given day is something that is in tune with your approach (some moves are too small for medium-term traders and some might appear too big for day-traders).

Plus, you might want to read why our stop-loss orders are usually relatively far from the current price.

Please note that a full position doesn't mean using all of the capital for a given trade. You will find details on our thoughts on gold portfolio structuring in the Key Insights section on our website.

As a reminder - "initial target price" means exactly that - an "initial" one, it's not a price level at which we suggest closing positions. If this becomes the case (like it did in the previous trade) we will refer to these levels as levels of exit orders (exactly as we've done previously). Stop-loss levels, however, are naturally not "initial", but something that, in our opinion, might be entered as an order.

Since it is impossible to synchronize target prices and stop-loss levels for all the ETFs and ETNs with the main markets that we provide these levels for (gold, silver and mining stocks - the GDX ETF), the stop-loss levels and target prices for other ETNs and ETF (among other: UGLD, DGLD, USLV, DSLV, NUGT, DUST, JNUG, JDST) are provided as supplementary, and not as "final". This means that if a stop-loss or a target level is reached for any of the "additional instruments" (DGLD for instance), but not for the "main instrument" (gold in this case), we will view positions in both gold and DGLD as still open and the stop-loss for DGLD would have to be moved lower. On the other hand, if gold moves to a stop-loss level but DGLD doesn't, then we will view both positions (in gold and DGLD) as closed. In other words, since it's not possible to be 100% certain that each related instrument moves to a given level when the underlying instrument does, we can't provide levels that would be binding. The levels that we do provide are our best estimate of the levels that will correspond to the levels in the underlying assets, but it will be the underlying assets that one will need to focus on regarding the signs pointing to closing a given position or keeping it open. We might adjust the levels in the "additional instruments" without adjusting the levels in the "main instruments", which will simply mean that we have improved our estimation of these levels, not that we changed our outlook on the markets. We are already working on a tool that would update these levels on a daily basis for the most popular ETFs, ETNs and individual mining stocks.

Our preferred ways to invest in and to trade gold along with the reasoning can be found in the how to buy gold section. Additionally, our preferred ETFs and ETNs can be found in our Gold & Silver ETF Ranking.

As a reminder, Gold & Silver Trading Alerts are posted before or on each trading day (we usually post them before the opening bell, but we don't promise doing that each day). If there's anything urgent, we will send you an additional small alert before posting the main one.

Thank you.

Sincerely,
Przemyslaw Radomski, CFA
Editor-in-chief, Gold & Silver Fund Manager